In an effort to generate feedback and spur debate, the Snyder Administration released a discussion draft of their proposal to replace the Michigan Business Tax (MBT) with the Michigan Corporate Income Tax. A copy of the document can be found at http://www.gongwer.com/public/biztaxdraft.pdf.

The proposal, which will no doubt be brought into further focus when the Governor releases his budget next month, follows through on Snyder’s campaign promise of a simplified, 6-percent corporate income tax. Only one credit will remain, the small business credit, as the proposal eliminates all other credit structures (e.g. film credit, MEGA credit, industrial property tax credit); however, retains the favorable treatment of insurance companies and financial institutions and the $350,000 filing threshold.

As a corporate-level tax, the proposal eliminates taxation of partnerships, limited liability companies (LLCs), S Corporations, and proprietorships. This, added to the elimination of the gross-receipts tax, which accounted for roughly two-thirds of the MBT, put the revenue estimates for this proposal at $1.5 Billion below the MBT – a significant number considering the State is already facing an approximate $1.85 budget deficit for the next fiscal year.

The coming days and weeks will certainly begin the debate the release of this preliminary draft was intended to generate as the proposal is reviewed and analyzed by legislators, staff and interest groups. Stay tuned to PAAdvisory for timely updates.